Survey: How are millennial home buyers saving to buy their first home?

Millennials are perhaps one of the most mysterious home buyers for both lenders and realtors. Unlike previous generations, their buying habits and decision making is very different. Many have tried to look into their behavior but they remain as mysterious as they are. This time, we would like to share a survey on “How are millennial home buyers saving to buy their first home?”

Millennial Home Buyers are Overcoming a Major Problem

If we look at most articles online, we could say that this generation seems to have a lack of interest in buying a home. The main reason for this perception is because of the fact that most of them are already in debt. According to statistics, today’s average student debt has ballooned to $37,000. Their main problem is paying these debts coupled with its interest.

Also, how can they purchase a new home if home affordability is an increasing problem? There is a continues to rise in rents and cost of living in metro areas. Hello, avocado toast scandals — has made it nearly impossible for many millennials to afford a monthly mortgage payment, let alone a down payment on a home.

Will Millennials Home Buyers Buy A New Home?

This is a difficult question if you will base your answer on the general perception but the thing it, MILLENNIALS ARE INTERESTED IN BUYING HOMES. If they are, then why are they not buying? Well, the fact is, it’s just too expensive to do so.

The National Association of Homebuilders has previously found that more than 90 percent of millennials say they eventually want to buy a house. What stops them though is the fact that median down payments on homes is now at a three year high of $18,850 across the country. For those planning to buy in a city like Los Angeles, that number is more like $120,000 if you’re putting 20% down.

Millennials are juggling a bunch of fairly new expenses that previous generations didn’t have to take into account, whether it’s those dreaded student loan payments or on-demand and subscription services like Uber and Netflix that have become a part of everyday life.

There seems to be a lot of talk happening around Millennials and whether they would eventually be good for the housing market, we share this survey. Also, December is a traditional month to start considering and saving up for homeownership goals. Here is a detailed look at where millennials currently stand with their homebuying plans and get insight into which expenses are the toughest to cut.

The 2017 Millennial Homebuyer Savings Survey

We are happy to be allowed by Open Listings to publish their survey. The survey asks 500 U.S. millennials between 18-34 years old to dig into how they plan to save up for a home and additional financial measures they’re taking to afford their downpayment.

Millennials are buying homes, especially in the Midwest

According to the OpenListings Survey, 44% of millennials have already bought a home. This means that almost half of them are actually a homeowner already. Overall Overall, millennial men were more likely to have bought a home (47%) than women (40%).

Furthermore, 30% of those under 24 are current homeowners, and 53% of millennials older than 24 have a bought a home. 48% of the respondents, which have yet to buy a house, plan to buy a home within five years. The other 52% of non-homeowners plan to buy in more than five years.

Millennials’ purchases of homes and plans to, also continue to be regional in nature. For instance, 51% of millennials in the Midwest note they have already bought a home, versus 41% of millennials on the east and west coasts.

What keeps other Millennial Home Buyers from Owning a Home?

“Avocado toast, we just can’t quit you”

It seems like millennials really do love their avocado toast — or at least, dining out. The survey finds out that the hardest expenses to cut from a millennials budget is dining out (e.g. avocado toast) at 37%. Surprisingly, it even beat out Student Loan Payments (35%), which is often a large fixed cost that cannot be easily mitigated within a personal budget.

Millennials, therefore, are food lovers which are not that surprising. According to previous studies,

“The average millennial eats out 5 times per week, which is more than 14% more than baby boomers.”

Even if it’s is the healthy, quick service choice that many millennials are opting for (think: Sweetgreen, Cava), we’re likely talking about $60-$100 per person, per week. Over the course of the year, that amounts to almost $5,000, or around 25% of the current national down payment average for a home!

What Other Expenses are Hard to Remove?

For existing millennial homeowners, dining out was an even tougher expense to cut, with 44% of them saying it was the hardest expense, compared to 27% choosing student loan payments. It’s likely that current millennial homebuyers may have been able to buy a home earlier because they weren’t suffering the same student debt crunch. Therefore, cutting student loan payments from their budgets while saving for a home was easier than their cohorts.

Comparatively, millennials that noted they wouldn’t be buying a home for at least another five years were the most likely to note how hard it was to cut student loan payments from their expenses (43%). This group of respondents was also more likely than their peers to note that Cable (e.g. Comcast), Transportation (e.g. Uber) and Online Subscriptions (e.g. Netflix) were hard expenses to cut from their personal budgets.

When it came down to other variable expenses, women found it easier to cut the gym from their expenses (8% noting it was hard to cut out) than men (13% noting it was hard to cut).

Home ownership for Millennial Home Buyers

Home ownership is worth the hustle

While the number of millennials home buyers moving back in at home draws media headlines, there are a variety of financial measures today’s millennial homebuyers are taking to save for a home. Millennials would rather consider getting a side job to accompany their 9-5 (40%).

They’re also likely to be foregoing yearly vacations (34%) and are more likely to consider moving in with a roommate to save for a home (19%) before going back to their old room at their parents (15%).

Those that said they won’t be buying a home for at least 5 years were the most likely to note they would consider moving back in with their parents (18%) to save money for a home. Women were also slightly more likely (16%) to note they would consider moving back in with their parents versus millennial men (14%).

Somewhat surprisingly, millennials that noted they were within 2 years of buying were the most likely to note that they would consider selling their car to save for a home (18%). This could be a result of eyeing locations that are more urban or near public transit.

9% noted they’d consider renting their apartment on Airbnb to save for a home.

Millennial Home Buyers: The Conclusion

With the impending impact of tax plan reorganizations and the continuation of a volatile market, the next two-five years will provide further insights into millennials and homebuying behavior.

The effect of this financial measures remains to be seen. Will they give millennial home buyers the possibility to grab their own slice of the home-owning pie.